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European Democracy under threat?

By Erkki Tuomioja*

Can the euro be saved or will it fall apart, bringing down the European project with it? My answer is a firm, yes; it can and should be saved. But it is another matter whether European politicians are actually able to deliver this.As the EU prepares for another crisis summit, which yet again is supposed to be decisive for saving the euro, it is high time to raise an equally vital question about saving democracy and the rule-of-law in Europe. Breaking the rules was, of course, one ingredient in creating the European debt crisis.

First, France and Germany were able to breach with impunity the deficit limit set in the Growth and Stability Pact. While this did not have negative consequences at the time – an indication that the arbitrary limits outlined in the pact inadequately reflected economic realities – it provided the framework for other less stable and prudent economies to break the rules, with much more disastrous consequences for everyone. And when the crisis started with Greece, the European Commission and governments resorted to panicky solutions that, in fact if not in admitted name, flouted the No Bail Out-clause in the treaties without bringing any sustainable relief.

It is clear not that saving the Euro will inevitably mean breaking more of the existing rules and creating new ones. Realistically, one has to be more understanding about the former taking place as the European Central Bank takes responsibility for keeping the European finance system afloat – with more than a little help from the IMF – than about the way Germany is leading the efforts to write tougher new rules for future financial discipline, with or without properly agreed treaty changes.

For one thing, nothing that will be implemented in a year or two at the earliest will bring any relief to solving the current crisis. Second, the EU has already adopted new legislation and instruments to be implemented by 2013, namely the so-called six-pack of legislation for better financial coordination with sanctions, and the permanent European Stability Mechanism, which unlike the ailing temporary European Financial Stability Facility it replaces, will also include provisions for debt restructuring and private financial-sector involvement. Worryingly, some governments seem to be inclined to bend to market pressure to water down these provisions.

It can be questioned whether, assuming we can manage the current crisis without a meltdown, we actually need – apart from maybe some seven-up to the six-pack – more measures when these instruments are in use. And even more importantly, while some of the proposals are harmless or even good, are they as a whole really taking us in the right direction or will they be imposing on future decision-makers anti-Keynesian and neo-liberal policies, which may well prove unworkable at best and socially and economically disastrous a worst?

I have my doubts. But the most serious concern should be the question of what this entails for democracy and the legitimacy of the whole European project. The way that billions of euros of taxpayers’ money has been thrown around on lost causes and in vain leveraging – not incidentally in an attempt to save mostly French and German banks at the same time, and the way proposals for new mechanisms that bypass all democratic and parliamentary institutions and will create new instruments characterized by a total lack of transparency have been pushed for – bodes seriously ill for European democracy.